Whither convergence: legal, regulatory and trade opportunism in telecommunications

Abstract

Technological and marketplace convergence supports the development of integrated information communications and entertainment (ICE) marketplace. (1) Yet for various ICE market segments to function without trade barriers and competitive distortions, the involved legal, regulatory, and trade policy regimes must adapt to changed circumstances. Of key importance is the need to assess whether to change basic definitions and assumptions that worked in a pre-convergent environment, but which provide opportunities for regulatory arbitrage, such as opportunities to tilt the competitive playing field to one's advantage by exploiting differences in classifications and qualifying for a status with less regulatory obligations and comparatively fewer market access opportunities for competitors. Many workable, semantic dichotomies break down in the convergent ICE environment, because technological innovations promote greater service flexibility and markets become more penetrable absent countervailing regulations and trade policies. For example, ventures operating in a digital environment can easily bridge preexisting legal and regulatory distinctions between content creator and conduit. Similarly, many types of Internet ventures use digitization to eliminate preexisting regulatory dichotomies between basic and value-added services, and between different trade policies and market access commitments made for goods versus services. Convergence challenges many baseline assumptions about ICE made by legislators, regulators, jurists, and trade policy makers. Information services typically qualify for little, if any, regulatory oversight based on assumptions that they enhance and add value to regulated basic telecommunications. What happens, though, to this assumption when unregulated Internet venture provides services that are functionally equivalent to what often heavily regulated telecommunications common carriers provide? Heretofore, communications ventures fit into a convenient regulatory dichotomy based on whether they create and disseminate content; for example, whether they engage in broadcasting, or operate as neutral, transparent conduits for the content created by others, such as telecommunications service providers like common carrier telephone companies. In the preconvergent environment, creators of entertainment could largely avoid regulation and concentrate on the creative and business process. As a result of marketplace convergence opportunities, content creators have turned into content disseminators like broadcasters, cable television operators, Internet Service Providers, and satellite operators. Efforts to liberalize and deregulate telecommunications have generated less success and more harm than anticipated. This is primarily because technological and market convergence raise new issues, and old issues do not simply evaporate through the remedy of competition. The legal, regulatory, and trade policymaking apparatus has not kept pace with ICE convergence. As a result, plenty of opportunities exist for causing delay, exploiting uncertainty, and using superior skill in gaming and brinkmanship to thwart competition or to tilt the competitive playing field to one's advantage. Stakeholders have primarily resorted to competing in courtrooms rather than in the marketplace, outcome all the more frustrating because most of the litigants also helped write the legislation and negotiate the compromises necessary to enact laws and trade policies. Recent deregulatory and market access initiatives have not achieved an equilibrium among all parties: regulators, legislators, operators and consumers. (2) Depending on one's perspective, clever and unanticipated outcomes either help blunt the adverse and meddlesome impact of poorly drafted legislation and trade policies, or forestall the full achievement of essential public policy objectives. With great opportunities to delay, litigate, or dispute the meaning of legislation and trade opportunities, stakeholders can exploit the nature and scope of the new and revamped regulatory regime that was designed to foster competition. …